Let’s say that the market doesn’t understand the banking system and the concept of MV=PQ like we talked about yesterday. People see the Fed creating money like it’s going out of style, so they think: Inflation, and start buying up commodities. Now, if the Fed is smart, and time their pivot from battling deflation to battling inflation at the right moment, shouldn’t you short commodities and go long consumer cyclicals? What’s the best way for a retail investor do do this? Just buying the ProShares (CMD) and the iShares Consumer Goods (IYK) ETFs. Can you think of a better way, assuming you believe the Fed will get it right?
Commodities already crashed. Ironically, it’s because so many of the new hands at the commodities game were also holding toxic non-commodity assets. Those new hands weren’t trading on information, just severely squeezed for liquidity.